Duty on Shopping: UK Entry Points

Debate between Henry Smith and Victoria Atkins

Wednesday 6th September 2023 Commons Chamber

[The Financial Secretary to the Treasury (Victoria Atkins)]

First, I congratulate my hon. Friend the Member for Crawley (Henry Smith) on securing tonight’s important debate. He brings so much experience and expertise on this issue to the Chamber, not just through his chairmanship of the APPG for the future of aviation, but as the Member of Parliament for Gatwick. I thank him very much for that. I am conscious that people outside the Chamber may be watching the debate, so let me say that what we are discussing is duty on the sale of alcohol and tobacco, which would ordinarily attract UK excise duty and VAT. My hon. Friend advocates for the removal of that duty and VAT for passengers who have entered Great Britain from outside the UK before they have reached custom-controlled entry points. I will give some background on the Government’s duty-free policy, because it is an important part of the overall picture.

In January 2021, the Government extended duty-free sales to EU-bound passengers for the first time in over 20 years, which was a significant boost to airports and international rail terminals in Great Britain. That change meant that passengers travelling from the UK to the EU were able to purchase duty-free goods once they had passed security controls at ports, airports and train stations on international routes. They also became able to purchase duty-free goods onboard international transport routes from Great Britain. As my hon. Friend said, we understand that customers find it convenient to buy their products during the flight, or to order them in advance and pick them up at the end. We are pleased that the change in policy has been a boost for UK travel hubs; indeed, I watch with close interest to ensure that the tax savings brought about by this Conservative Government are passed on to consumers, because that is important. I hope that retailers watching the debate will note the Minister’s interest in their doing the right thing and ensuring that those savings are passed on.

When we made those changes in 2021, we said that we were not considering a similar policy for arrivals, for several reasons. First, as my hon. Friend has identified, there were serious concerns about the impact on shops in the UK, whether on the high street or closer to an airport. Duty-free on departure encourages purchases in the UK that might otherwise be made abroad. That case is less clearcut with regard to allowing customers to buy goods duty-free on arrival; that could create an unfair playing field for the domestic duty-paid retailers working either in the confines of the airport or station or beyond them.

The hon. Member for Edinburgh West (Christine Jardine) mentioned her local airport of Edinburgh. I am thinking of arrivals at Heathrow, where once a passenger has gone through customs, they are in the arrivals hall, and there are shops there selling products, as one would expect. I must confess that I have never tried to buy cigarettes or alcohol from those shops, so I know not what prices they would charge, but importantly, because they are on the arrivals side of the barrier, they have to charge duty and VAT on products. There might be only a few feet between those retailers selling products duty-free and others selling the very same products beyond the barrier, on the arrivals side.

Secondly, we would have to consider the need for adequate infrastructure and resourcing for the publicly funded Border Force, so that it could combat fraud, ensure compliance with requirements and enforce any charge at all entry points. In a moment, I will go into some of the duties that Border Force has at airports, but we must remember the enormous responsibility on those officers at travel hubs, and the range of offences and activities that they have to be alert to. As a former Home Office Minister, I would have to be very careful to understand how giving those officers extra responsibilities regarding the sale of duty-free alcohol and tobacco would be of wider benefit to the British public. Businesses would also need to put supporting infrastructure in place, which would be costly to them.

Finally, duty would of course be lost from those sales. We have considered very carefully the York Aviation report. My officials have briefed me on it, and we appreciate the effort that has gone into it, but we consider that the report falls into the error of overstating the size of any additional economic activity that would result from the proposal. We remain to be convinced that this change to VAT and duty policy would lead to a rise in sales of these products that would support the creation of many new jobs across the economy.

[Henry Smith]

Would Treasury Ministers be willing to meet industry representatives to discuss the concerns that the Minister is expressing about the impact of the policy change? Through such dialogue, we could probably find a solution that would alleviate fears across the board.

[Victoria Atkins]

I am very happy to meet my hon. Friend and representatives, but I must temper expectations. For a change to be made of this nature, the economic case for the entire UK economy would have to be very strongly made. He will appreciate that I receive many well intentioned suggestions on removing VAT—and other forms of tax, but particularly VAT—from products. Indeed, I think we are up to £50 billion-worth of suggestions since we regained our freedoms on leaving the EU. We have to be very clear as to the economic benefits, but I am always very happy to meet my hon. Friend.

The report also deals with the issue of jobs. Again, we remain to be convinced that, if jobs were to be created, they would be additional to the jobs already in place in the high street that involve selling alcohol and tobacco with duty and VAT charged, as they are obliged to be charged on the UK high street. I am afraid that we do not accept the report’s conclusions.

I will give my hon. Friend a little bit more detail on the broad objectives behind duty-free on arrivals. First, we are very conscious that the duties we charge on alcohol and tobacco serve not just an economic purpose, but the critical public health objective of trying to persuade people to stop smoking, or to smoke far less, and to have a healthy relationship with alcohol. Indeed, my hon. Friend will know of the very sensible changes made to the alcohol duty regime in the Finance Act 2023 to enable products with a higher strength of alcohol to be treated differently from products with a lower alcohol content. That was done because, as I think we all acknowledge, reflecting the strength of alcohol in the duty price is a way, we hope, of helping people to make decisions about their health. Our current duty-free-on-departure policy strikes a balance between those objectives and supporting international travel, but we would have to consider carefully whether duty-free on arrival would maintain that balance.

Secondly, we ask whether displacement would occur, and whether any losses would outweigh any indirect benefits of increased economic activity. Outbound duty-free for EU passengers alone is estimated to cost around £200 million per year, primarily through displacement of duty-paid high street sales to duty-free stores. The Chancellor has been clear that it is vital that we continue to act responsibly with the public finances, so the risk of eroding tax revenues is not one we will take lightly. Finally, there is also a compliance angle. The Government would have to put measures in place to mitigate the risk of increased illicit activity, which would require the diversion of Border Force staff from other crucial areas. That includes the priorities that we rightly set for them, including matters such as illegal immigration, drug smuggling, gun smuggling, terrorism, and other serious offences. That is why we must be very careful before contemplating adding to Border Force’s responsibilities, and its vital work of protecting the nation, day in, day out, and ensuring that the law is obeyed by those who travel overseas or into our country.

Of course we keep this policy under review. I would be happy to meet my hon. Friend to discuss it further, but we would need strong evidence to assure us that high-street duty-paid businesses would not be disadvantaged by a policy of duty-free on arrivals before we even considered any such changes. To reassure my hon. Friend, I asked my officials to pick up on the point that he raised about the EU contemplating changes to the system, and as far as we know, we do not believe that the EU is considering that. Of course, we will ensure that that information is up to date. I am told that as recently as 2021, the EU Parliament said that it was not considering that, but I appreciate that international politics change.

I reiterate the support that the Government have committed to the aviation industry—indeed, often at the behest of my hon. Friend during the pandemic. In May last year, we published “Flightpath to the future”, a strategic framework for the sector to build back better. Through it, we aim to make UK aviation cleaner, greener and more competitive than ever before. The framework explores key issues, including workforce and skills, connectivity, global impact, innovation and decarbonisation. I note with interest those parts of my hon. Friend’s speech concerning different types of fuel for the airline industry. That is the sort of work that we wish to help the aviation industry with and, more particularly, to develop in the UK as far as possible.

In conclusion, I thank my hon. Friend for his speech. I reiterate that we have considered this matter carefully, but we must prioritise our responsibilities for the public finances. That is why we do not feel able at this point to agree to the suggestion, but I am happy to keep the issue under review, and to meet him to discuss it further.

Question put and agreed to.

Oral Answers to Questions

Debate between Henry Smith and Victoria Atkins

Monday 21st January 2019 Commons Chamber

[Henry Smith (Crawley) (Con)]

19. What steps he is taking to tackle serious violent crime.

[The Parliamentary Under-Secretary of State for the Home Department (Victoria Atkins)]

We launched the serious violence strategy last year; it has culminated in detailed work, stretching across Government. It includes the Offensive Weapons Bill and the serious violence taskforce. In addition, we want to build resilience for young people into the future, so we will be launching a £200 million youth endowment fund to intervene on children and young people at risk of serious violence. Shortly, we will consult on a new duty to underpin the multi-agency approach on public health.

[Henry Smith]

Sussex police and crime commissioner Katy Bourne was recently successful in getting a grant of almost £1 million from the Home Office—I thank the Department for that—to specifically address serious offences among young people. May I have an assurance that Crawley will continue to remain a focus of such support to combat serious offences?

[Victoria Atkins]

I congratulate police and crime commissioner Katy Bourne; it is always a pleasure to work with her. That was one of 29 projects awarded a total of nearly £18 million from the early intervention youth fund. The project in Crawley helps engage positively with children under 18 at risk of committing serious violence. The project will establish a network of coaches, drawing together the various agencies working with those young people—again, very much underpinning our approach to tackling serious violence: that we should all be concerned about this matter and working together on it.

National Minimum Wage (Workplace Internships) Bill

Debate between Henry Smith and Victoria Atkins

Friday 4th November 2016 Commons Chamber

[Victoria Atkins]

Certainly it did for the years following the introduction of payments for pupillages. However, it was felt that, in the longer term, the pupillages would be of a higher quality, because a chambers would be very much focusing on making sure it got the right calibre and quality of candidate to suit its business, rather than being a bit of a factory of pupillages and encouraging people who, sadly, did not then later find better, long-term employment.

I am glad that this debate has been brought to the House, as it is important to raise awareness of when an intern is due the national minimum wage so that the 1998 Act is followed. In our current legislation, the term “intern” is not defined explicitly, and it can be ambiguous as to whether a person performing an internship also falls under the definition of “worker”. Work experience can be called a placement or an internship, and volunteering schemes that do not involve working activities are also often referred to as internships. As this is a complicated area where the line between what should be an unpaid internship and a contractual working relationship is often blurred, and can indeed be crossed without either party meaning to do so, it is most effective for the Government to offer guidance to assist employers to adopt best practice.

The Minister may well take away from this debate the point made by my hon. Friends the Members for Elmet and Rothwell and for North East Somerset (Mr Rees-Mogg) about the maximum of 28 days in any calendar year. That would be a good starting place for working out whether a person is an intern or somebody on work experience, or whether they have entered into a more contractual relationship with the person offering the experience.

It is vital that employers as well as employees are aware of the statutory provisions that are available, because some of these roles do not require the minimum wage to be paid. There is no doubt, however, that there are situations where what is referred to as an internship describes work activities, and those participating in the scheme should be paid. I applaud my hon. Friend the Member for Elmet and Rothwell for drawing attention to that ambiguity.

While I welcome the information provided by the Government through their website, gov.uk, and ACAS, I urge them to continue to review the effectiveness of the guidance they are offering in this area. I encourage all businesses to make provision to allow young people of all socioeconomic backgrounds such opportunities.

[Henry Smith (Crawley) (Con)]

My hon. Friend is absolutely right that internships and work experience can give opportunities to young people. Many charities and small businesses could not necessarily afford to pay for internships. It is therefore important to have greater clarity on what is appropriate, and I congratulate her on asking the Government to keep this matter under review.

[Victoria Atkins]

I am extremely grateful to my hon. Friend. I also welcome the work done by the Government to promote fair and open access to paid internships through the graduate talent pool, the social mobility business compact, and the common best practice code for high-quality internships, which ask employers to ensure that any internships they offer are paid fairly.

Alongside offering guidance, we must continue to crack down on employers who are not treating employees fairly. I welcome the fact that this year the Government have increased HMRC’s enforcement budget by £7 million, improving its ability to crack down on employers who exploit interns and fail to pay staff properly. I declare an interest in that I used to prosecute criminals for HMRC. I wish it well in its endeavours. Employers who pay workers less than the minimum wage not only have to pay back arrears of wages at current minimum wage rates, but face financial penalties of up to £20,000 per worker. I hope that the message leaves this Chamber today that it is not worth employers trying to get round the rules, and that they must treat their employees and interns fairly.